Multiple share classes are the norm even before the new acquisition types we see here. It’s extremely common in an acquisition for employee shares to be worth nothing while investor and founder shares are paid out.

But these new “acquisitions” aren’t even that. They are not acquisitions at all. They just hire the talent directly with perhaps an ip rights agreement thrown in as a fig leaf.

I'm well aware of dual class shares, but preferences are typically 1x, and none of the deals were for less than the amount raised, so they're not relevant here.

The fact that these are not really acquisitions doesn't change the fact that Groq the entity now has $20b.

Groq doesn't keep that money, it goes to VCs. They claim the company is "pivoting", not "selling" and avoid the payout trigger.

Money can't just "go" somewhere, it needs a reason first, at least for book-keeping. I mean, VCs can get their invested capital back but on top of that, how would that money be transfered? $20B is a lot and for sure the VCs will not just write an invoice of $18B for consulting services.

Hey, husband of that friend here, The bought company had huge debts to the investors (it is a startup, not tiny but small one, ran for several years) and after cashing those out from the purchase deal, the employees were left with shares that were worth 0$. (might be that the founders also grabbed some money out of that purchase, no one knows tho)

The employees of that bought company were given an incentive by the buying company to stay for a while and help tearing down and integrating their product into the buying company.

One could say shady, I'd say that it was just a bad deal.

Thanks for the details.

It's definitely true that common stock gets $0 if the acquisition price is <= (sum raised + debt).

That sort of sounds like the startup wasn't doing well, and the acquisition wasn't for a lot of money (relative to amount raised), which seems very different from these Groq/Windsurf situations.

There have been at least a half dozen of these deals in the past 1-2 years including Google “licensing” CharacterAI to pull their founders back into Google as valued employees.

In the deal mentioned above: my guess is that preferred class shareholders and common shares got paid out but the common shareholders had such a low payout that it rounded down to zero for most employees.

This can happen even in a regular acquisition because of the equity capital stack of who gets paid first. Investors typically require a 1x liquidation preference (they get their investment back first no matter what).

Liquidation preferences are typically 1x these days, so they only matter when companies are sold at fire sale prices where basically nobody is making any money.

The deals are all weird so it's hard to really know what's happening, but if Groq gets $20b, I don't see how common stock holders don't get paid.

Special dividend to priority class and retain the rest to grow the remaining sham company?

I've seen some discussion that paying out normal employees might look more like an acquisition on paper which they may want to avoid for ftc reasons. I've also seen some discussion that this is a quid pro quo to the trump family to get Nvidia back into China (jr. bought in at the September financing round..).

Lots of speculation in general, including why nvda chose to spend 20bil on this.

Do you actually know this is what happened?

Dividends to only one class seems crazy. I would be kind of shocked if that was legal.

No, I have no visibility. I'm saying speculation is rampant is all.